LexCONTROLLER OF ESTATE DUTY, KERALA versus NALINI V. SARAF
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
y-/ ;
[2009] 15 (ADDL.) S.C.R. 1143
CONTROLLER OF ESTATE DUTY, KERALA
v.
NALINI V. SARAF
(Civil Appeal No. 8247 of 2004)
NOVEMBER 25, 2009
[S.H. KAPADIA AND H.L. DATIU, JJ.]
Estate duty -
Value of goodwill - Determination of -
Application of super-profit method - Partnership firm engaged
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in export business -
Death of partner of a firm -
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Determination of accumulated profits and goodwill in firm -
Assistant Collector applying super profit method, applied
multiplier of three years purchase - Also held that refund of
income tax after demise· of deceased, constituted property of
deceased - Tribunal and High Court holding that multiplier 0
of one year purchase to be applied and refund had not
become due when partner died but the claim for refund was
pending adjudication - Interference with - Held: Not called
for - There is no hard and fast rule regarding multiplier to be
applied for evaluating goodwill of the firm - It depends on the
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nature of business and prevailing market conditions - Refund
of income tax stood determined only after the demise of the
deceased - Hence, not a property available at the time of
death.
Estate of Late General Sir Shankar S.S.J.B. Rana vs.
F
Controller of Estate Duty (1990) 186 l.T.R. 578, referred to.
Case Law Reference :
(1990) 186 l.T.R. 578
Referred to.
Para 6
CIVIL APP ELLA TE JURISDICTION : Civil Appeal No. 8247
G
of 2004.
From the Judgment & Order dated 18. 7.2003 of the High
Court of Kerala at Ernakulam in Income Tax Reference No. 62
1143
H
1144 SUPREME COURT REPORTS [2009] 15 (ADDL.) S.C.R.
A of 1998.
WITH
SLP(C) No. 16981, 16985 of 2006
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C.A. Nos. 1700 of 2006, 5812 of 2005 & SLP (C) 9233 of 2006.
Parag P. Tripathi, ASG, Kunal Bahri, Arijit Prasad, Varun
Sarin, Amey Nargolkar, B.V. Balaram Das for the Appellant.
P.J. Pardiwalla, Rustom B. Hathikhanawala for the
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Respondent.
The Judgment of the Court was delivered by
S.H. KAPADIA, J.
Civil Appeal No.8247 of 2004:
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1. Heard learned counsel on both sides.
2. This civil appeal is filed by the Controller of Estate Duty,
' ....
{
Kerala, against the decision dated 18th July, 2003, delivered by
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the Kerala High Court in Tax Reference No.62 of 1998.
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3. One V.G. Saraf passed away on 18th October, 1984. He
was a partner in M/s. Saraf Trading Corporation, a partnership
Firm carrying on business as commission agents and as
exporters of Tea. The Firm was constituted under Deed of
Partnership dated 27th November, 1963. The Firm had three
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partners. The deceased had fifty per cent shares in profit and
loss. On 16th September, 1981, the Firm was re-constituted with
the admission of one more partner and a minor. The Assistant
Controller of Estate Duty, inter alia, held that, for determining the
value of goodwill, there were two methods of valuation, namely,
G super-profit method and total capitalization method. The
Assistant Controller preferred the super-profit method. It may be
noted that, in this case, the method is not in dispute. What is in
dispute is the application of the super-profit method to the facts
of the present case. Applying the super-profit method, the
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CONTROLLER OF ESTATE DUTY, KERALA v. NALINl1145
V. SARAF [S.H. KAPADIA, J.]
Assistant Controller applied the multiplier of three years'
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purchase whereas the assessee-respondent contended that 3X
was excessive. The Assistant Controller further held that refund
of income tax, which became due after the demise of V. G. Saraf,
constituted property of the Deed, which was also disputed by the
legal representatives of the deceased.
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4. We are concerned, therefore, with the valuation of the
,goodwill and the refund of income tax in this appeal.
5. The partnership Firm, as stated above, was engaged in
the business of exporting Tea. It exported Tea to U.S.S.R. On c
facts, the Income Tax Appellate Tribunal [for short, "the Tribunal"]
found that, at the relevant time, the market conditions in U.S.S.R.
were not congenial; that there was huge volatility in the Tea export
business; that export of Tea had huge volatility even otherwise;
and, in the circumstances, the Tribunal applied the multiplier of
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one year's purchase instead of three years' purchase. This finding
was rightly upheld by the High Court. In any event, there is no hard
and fast rule regarding multiplier to be applred for evaluating the
goodwill of the Firm. It all depends on the nature of the business
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